Graveyards of the Housing Bust By Mike Colpitts
They are littered from coast to coast and do not discriminate. Zombie subdivisions and housing developments are scattered across the nation like nothing since the Great Depression. They are the wreckage of failed developments and urban sprawl gone mad during the real estate boom, left to rot in the summer sun.
Ghost Towns in the old west were vibrant communities given to growth and prosperity. But Zombie developments never experienced prosperous times. They never found their place and are under going a sort of quiet death. They are the graveyards of the housing bust gone bad.
An informal sampling of public records shows that thousands of such developments, ranging in size from small 10 lot plats to hundreds of lots sit idle decaying in a state of incompletion. Some are composed of homes boarded up, and others left with rotting wood piles attracting insects, rodents and the homeless seeking shelter. Zombie developments may be found in every state.
Some developments are partially finished subdivisions of new homes or condo projects that ceased construction. Others are platted subdivisions with few new homes constructed among an inventory of empty lots. Some only hold a single residence.
In Homestead, Florida in the outskirts of Miami a new subdivision promised homeowners of high-end estate homes architecture of the tropics in the abundant Florida sunshine. Instead, the Antillean Isles delivered views of gravel, dirt, weeds and incomplete aging homes. It’s a depressing site for the few residents who make the partially finished subdivision home.
Home values have plunged 70% since the real estate boom went bust in the southern reaches outside of Miami in Homestead and nearby Florida City. Homebuilders have been going bankrupt in the housing bust.
Builders like Silvio Cardoso in Homestead are just fighting to survive. When the market was booming Cardoso bought cheap agricultural land to build on when it looked like the suburbs would just keep growing south of Miami with new subdivisions. Now nearly 9 out of 10 home sales in Homestead are of distressed properties.
New developments are in peril from the foreclosure epidemic and lack of consumer interest as more people wait out the housing bust. The same situation exists in the Inland Empire in Southern California, and in the Central Valley community of Tulare, where half built developments owned by national building companies have been stopped in their tracks.
In North Carolina, one development sheds light on the plight of partially completed subdivisions that have failed left to rot. Wilmington experienced the boom as people fled the cold of northern states, seeking a better quality of life. Outside of Wilmington near Myrtle Beach, a resort community, a huge golf course subdivision of homes were sold to hungry buyers, but failed to be constructed when the boom went bust.
Empty barren subdivision tracts are text book examples of Zombie subdivisions sitting empty near Myrtle Beach, which like many other similar developments already have improvements, including electric, sewer and telephone lines installed underground. Few builders would consider touching them for years finding the appetite for risk too high.
The nation’s housing crisis is a crisis of monumental proportions. The U.S. government is now straddled with more than 50,000 homes to sell off, and the inventory of foreclosures is growing by at least 3,000 a day.
The Department of Housing and Urban Development acquired more than 110,000 foreclosed houses since beginning the purchase of asset-backed securities, spending about $12.2 billion to reimburse lenders after owners were foreclosed. The crisis is only expected to worsen over the coming year as another wave of foreclosures develops, and another wave after that and among them will be many Zombie properties.